Top Tips For Buyers: How to Buy at Auction

AuctionPreparation prior to auction day

Speak to the real estate agent who is looking after the sale of the property you wish to buy. Tell them you will be attending the auction and ask them to advise you of the relevant legislative and financial requirements.
Obtain a copy of the contract of sale prior to auction day so you can ask your solicitor to review it. It is important to check the settlement date, the minimum deposit required, as well as the inclusions and exclusions of the property. This way you can go ahead and bid with confidence.
Make sure you have pre-arranged finance in place, this will help you to bid within your means. You will be able to obtain a pre-approval letter from your financial institution so you will know exactly how high you can bid to.
It can be worthwhile attending other auctions so you get a feel for how the process works. Try to go to an auction that is being held by the same real estate agency representing the sale of the property you want to buy. They are likely to use the same auctioneer and it will give you a feel of the pace and style to expect.
Make sure you have conducted all the necessary checks on the property, such as building and strata report if you are buying an apartment. Buying at auction is unconditional.
Make sure you are able to pay a 10% deposit (typically) on the day of the auction if you are the successful bidder.

What to do on auction day

The auction will either be held on-site or in a room with a number of other auctions. If it is an on-site auction, arrive early so you can take the opportunity to have one last look at the property and ask the agent any final questions you may have.
Depending on which state you live in, you may need to register to bid by showing your driver’s license in exchange for a bidding registration number. You will need to show this number to the auctioneer every time you make a bid to buy the property.
If you are unable to attend the auction yourself and a friend or relative will be bidding on your behalf, then you will need to provide them with a Power of Attorney. This Power of Attorney will need to be given to the auctioneer prior to the commencement of the auction. It is a good idea to notify the agent a few days prior so that they can ensure you meet all legal requirements.
If you are worried about your emotions or nerves getting the better of you, it is a good idea to have a friend or family member there with you for moral support. They can pull you away if the bidding goes over your budget, particularly if you’re worried about getting carried away on the day. It can also be helpful to have a plan or strategy in place so you know when to walk away rather get caught up in a storm of emotions and stress that sees you paying a whole lot more for the property then what you originally intended.
The vendor will set a reserve price prior to the auction commencing. The reserve price is the minimum amount the vendor is prepared to sell for. Once this reserve price is reached the auctioneer will usually state that “the property is on the market”. This may kick start fierce bidding as buyers now know that the vendor will sell at any amount called from this point. If the bidding is slow, the vendor is able to submit a “vendor bid” to help get things moving. If the property does not meet the reserve and the vendor does not accept the highest bid reached, the property may be passed in. The highest bidder will usually be offered the first right to negotiate with the vendor.
The auctioneer must call the sale three times prior to the hammer falling, for example going once, going twice, third and final call, SOLD! If you are the successful bidder, you will be required to pay a 10% deposit at the fall of the hammer (unless you have negotiated otherwise).
Remember that at an auction, one person’s tactics can be quite different to another person’s. Some may sit back and wait till the final moments to place a bid, while others might jump straight in from the start. It is best to do bid in whichever manner is most comfortable for you. Try not to be intimidated by the other bidders so you can remain focused and confident. While a plan is good, remember anything can happen on the day. Treating the auction process like a business deal can help you to remain objective and make rational decisions.

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